Thank you very much for waiting. Presenters are coming up on stage. Let us start the press conference. The presenters are as follows. Ms. Takako Sakai, the Chairperson of Nidec Corporation's Nomination Committee. Mr. Mitsuya Kishida, Representative Director, President, and CEO of the company. Mr. Masayuki Minai, Senior Vice President and Chief Compliance Officer. Mr. Kazuo Nakagawa, Acting Chief Financial Officer of the company. I'm Keita Watanabe, General Manager of the company's Corporate Communication Department. In this press conference, first, Mr. Kishida will make his opening remarks and explain quality matters and Nidec's actions on a corporate revival. Ms. Sakai will present our company's new Board of Directors system, followed by Mr. Kishida's presentation on the company's matters on improving Nidec's corporate value. The floor will be open for a question- and- answer session.
Please kindly wait to ask your questions until then. Now, Mr. Kishida, please.
I'm Mitsuya Kishida, Nidec Corporation's Representative Director and the President. A recent inspection of Nidec group companies led by the Nidec Corporate Reform Committee's Quality Working Group has revealed suspected inappropriate misconduct on our company's products. We take this issue extremely seriously, as quality is the very basis of the Nidec group, which is a manufacturing company. In addition to the series of cases of accounting misconduct, we deeply apologize for the tremendous anxiety we have caused to our business partners, shareholders, investors, people of the market, and the general public. We are explaining these issues to our customers and informing them of these issues in details one by one. At this moment, no cases that affect our products' functions or safety have been identified. Today, we have launched an Investigation Committee that comprises outside experts.
Based on the decision to do so, we will explain findings from this investigation to our customers sincerely and properly. We will take necessary actions promptly. We will make sure to do everything that is right. In order to do so, we will update our improvement plan, and we will be united as the team. We are in the process of making these improvements happen. We have been able to identify these quality issues during this process of improvement. We'd like to give you an updated information about these activities during this press conference. With respect to the report from the third-party committee, as well as the improvement plan, we will enhance our corporate functions, and we'd like to provide you with an information about the enhanced functions of the Board of Directors, based on Ms. Takako Sakai's presentation.
In order for us to become the true global company, we have a strategy in place. We'd like to provide you with the midterm business strategy to explain the purpose. From here on, we would like to sit as we make our statements. Thank you.
From here on, Mr. Kishida presents information on quality matters and Nidec's actions on the corporate revival.
From here on, I would like to explain to you about how to make Nidec reborn. We, together with Ms. Sakai, explain this formation matter. First of all, please take a look at this page, the establishment of the Investigation Committee. After the establishment of the Third-Party Committee on September 3rd, we established this Nidec Corporate Renewal Committee on October 30th.
We, as a manufacturer, voluntarily decided to identify any possible issues when we established this quality working group at the same time. We started the group-wide quality inspection from January 8th this year. As for the outlook of this inspection, the period was from January 8th through the end of May, and this investigation is ongoing. There are issues related to quality, and we wanted to check for any misconduct, possible misconducts, and we promote corrective actions to solve these matters. For details of our actions, we have the hearing sessions with the individual business bases. This hearing session is now completed. We had this voluntary checking process at individual business bases, promote their voluntary declaration. As of today, 90% of this procedure has been completed.
Going forward, we will continue to collect opinions through a whistleblowing system from all the employees on the Nidec group. We are to check to see if there is any suspicions for misconduct regarding quality. We like to collect such information from all employees within our group. Please take a look at this slide over here. Please go back one slide here. From January the 8th, we started our quality inspection. On March the 3rd, we have had the announcement on personnel changes. From April the 4th, the new management has started. After that, we have received a number of quality-related opinions as well as suggestions based on voluntary checking. As of today, this year, approximately more than one-third suspicious misconducts have been reported.
In April, this number increased significantly, so we determined that we need to check, we need to understand what was really going on. There had been some unauthorized changes to materials, processes, as well as designs made without having an approval from our customers. As soon as we identify issues to be reported, we will take appropriate measures for them. As of today, unauthorized changes to material components, processes, designs, they account for 96.7% of all the issues. Suspicious cases account for 3.3% of the entire cases, as you can see on the slide. By business, please take a look at this slide over here. Appliances related issues are the majority of all the issues we have identified.
ACIM business unit, Global Appliance, Nidec Instruments, Nidec Techno Motor is appliance section. With respect to Automotive business, Nidec Instruments Corporation has had to report some issues regarding their production related products, items. With respect to IT related businesses, there are a certain number of suspicious cases identified. We have already started talks with our customers, and we have confirmed that none of these issues are serious enough to affect our products' functions or quality or safety. AI cooling system has no such issues identified. With respect to industrial infrastructure and machinery related products, no such inappropriate cases have been identified. To today, in multiple business bases, we have identified various suspicious cases of misconduct, and we decided to promptly disclose this information to the public.
In order for us to make group-wide efforts to eliminate those issues, we decided to launch an investigation of transparently and objectively. That's the decision we have made in today's Board of Directors meeting at our company. The purpose of this Investigation Committee will be to understand the root causes of these issues and suggest recurrence prevention measures. Here are the members of the Investigation Committee. These people have a wide range of expertise. They're all attorneys- at- law. Targeting the end of August, we elect to finish the investigation on these quality issues. Please go to the next slide. In order to work with this Investigation Committee, as an executive function of the company, we decided to reshuffle or revise our corporate function. We have this Improvement Promotion Office to be established. I will lead this office.
With respect to this Improvement Promotion Office, we will decide what type of communication will be the best type of communication we should have with our customers. We will drastically improve the way we communicate with our customers. That's the type of project we will launch. At the same time, we have governance and accounting related issues. These issues will be covered in this other project that you can see on the slide here. We are going to have this type of reset on our activities going forward. In these individual matters, we will check and examine our actions. We will working group to analyze the financial impact of our actions and these issues. From here on, we like to talk to you about the update on Nidec's reform.
On the 27th of April, we have started the Third-Party Committee's initiative started from the 3rd of September, based on this final report from this Committee, we issued the revised version of the improvement plan, which is the second version. From now on, we execute this improvement plan for sure, therefore, all of the employees will welcome this. Based on that, by the due date of 20th of October, toward the submission of the confirmation paper, we would like to make all out effort for each day. Furthermore, we see these quality issues identified right now. As of today, we have established the Investigation Committee to facilitate the dialogues with our customers to expedite to the root cause analysis and then issue resolution.
Around by the end of August next year or this year, we would like to complete investigation. We would like to issue the confirmation report of the internal governance under the new system and organization. We would like to regain of your trust as soon as possible. In addition to that, we would like to lift the designation of the special issues. All of our members and employees will work as one team. Already so far, we have identified in issues that is culture, systems, and processes. We have shared these important points over and over again externally too. In order to embody these spirits into our actions, we would like to take any opportunities and occasions to reform the culture, systems, and processes.
To be more precise, we need to look at communications as well as how we need to consider how we should revise the corporate culture. In addition to that, since governance is such a huge area, we have to consider how we can specifically work on governance issues. We need to review organizations, and we need to review missions. Why we are here, we need to identify the raison d'être as a company, then we can ensure that whatever we will do, everything will be right. Therefore, we would like to work as one team, mobilizing all of the employees, including myself. Though the available time is limited, we would like to visit as many sites as possible to meet managers and non-managers to have direct dialogues, because voices from the working level is very important.
We have had so many dialogues like this. Although this has been already reported to you, now we have established a Culture Transformation Lab where employees are the protagonists to reform cultures. Then, we need to listen to the representative voices of employees, and we have to make employees confident that once they are speaking up, their voices will be well heard to the Managers and Executives. Of course, the training and the education lessons are the very basis for our culture, therefore, we will make further efforts. Already more than 500 training courses has been conducted. However, this should not be one-off thing, because for new Nidec, this should be the continuous efforts to ensure everything should be right all the time. Therefore, we would like to lay the foundation to ensure such culture.
Under this situation, new management team is established effective of the 1st of April under the new BODs. All of the BODs got together at one site to have off-site meeting where BODs consider how we can regain the trust from stakeholders, and how we should take actions every day, what we have to reform in our daily activities. There were thorough discussions on these topics, and then the direction identified and these discussions have been shared. We have made the reform statement, and then including myself, all of the members involved will work as one team to be the model of the reform. That is the current situation. From now on, Ms. Sakai, as the Chief of the Committee, will share the new BODs. Now, Ms. Sakai, floor is yours.
Thank you very much.
I'm the External Directors and I'm the Head of the Committee, Nomination Committee. On the 13th of May, there's the ad hoc BOD committee meetings. What should be resolved for the shareholders' meeting. One of them is the new BOD members. I'd like to share the details of these new BOD members. First of all, I'd like to explain the process and its purpose for this governance reform. We needed to enhance the supervising function. In order to do that, we realized that now we have to have a new BOD system. We have to ensure to establish such new system. For example, those who have deep knowledge about accounting and governance, those external officers should be identified and nominated.
In addition to that, internal Directors should be identified for this matter in order to ensure good identification of the issues. We'd like to nominate the dedicated members. Through the process, we'd like to realize these two important focuses, including shareholders and other stakeholders. We have to regain the trust. In order to do that, we have to ensure high transparency and objectivity, which should be the basis for the nomination system. Therefore, we have to prepare the framework for that. Therefore, when we launch the nomination process on the 27th of March, as we have announced, independent or external directors alone are allowed to be involved in this process. In addition to that, nomination policy and the revision of the nomination process has been made. I'd like to explain the specific flow for the nomination.
First of all, the new criteria for the nomination were put in place, under which more than dozens of people were identified as the primary candidates. After the first criteria passed, the first interview was given, and then skill matrix and other qualifications. In addition to the views of the current state of the Nidec Corporation and how they can contribute to the reform, those questions are meticulously confirmed with all of these candidates one by one. Based on the interviews, the we got the evaluation. In addition to that, we look into the diversity of the expertise and the experiences, then we have to see the balance of these members.
We can identify the short list of candidates, especially the external directors, home compliance, accounting, finance, the business management experiences, expertise, and the skills for the markets. These are the important points. In addition to that, they are required to understand the current state of the Nidec Corporation. Of course, now we have to take a look at experiences in the business management. The objective for this nomination, more diverse the expertise and more enhanced in the oversight, governance reform, and corporate value improvement. For these aspects, we are confident in selecting best members. Independence and execution are the oversight should be enhanced. Therefore, we have, we plan to identify external parties to do this. I'd like to introduce the 12 candidates.
Because of the time, I cannot explain the detailed reasons why they are identified as candidates. However, please refer to the presentation material if you're interested in the reasons for the nomination. First of all, just one person was identified, and therefore remaining 11 candidates are the candidates for the new Directors. You can see the three candidates for the executive internal BOD members. Regarding Mr. Kishida, he has as a vanguard for the reform of the culture, and therefore, he can contribute to the improvement of the corporate value, and we can expect the continuous leadership. Because of that, we believe these three are the best candidates.
Regarding Mr. Takeshi Miyake and Mr. Masayuki Minai, we expect to assume who the Management Directors for each, and therefore under these gentlemen's leadership, we believe that now they can identify issues, especially for the execution. We believe that for this aspect, these two are the best candidates. I'd like to move on to the outside of BoD members. As you see here, these are five members. [Mr. Akira]. As the member of government, he has led many governance related initiatives. Mr. Shinichi Koizumi, who has been involved in the global executives, and he has now rich experiences in serving as the outside members. Mr. Soichiro Sakuma. He's the CEO and Vice President of the Nippon Steel & Sumitomo Metal Corporation, who has been involved in the management of the major companies.
Mr. Yuji Nishiura. He has led many reform activities at major companies. In addition to that, he has served as the chair of the many companies. He has rich experiences and wide range of expertise. Mr. Ryoichi Yamamoto. He's the President and CEO. He has been involved with the business management and the transparency governance management. Outside members who will serve as the Audit and Supervisory Committee Members. First candidate, Mr. Takeshi Yamazaki at the Hitachi Corporation. He has been involved in the structural reform, and he has also have the experiences in serving as the audit and the supervisory committee member. Mr. Hideki Amano has also had rich experiences as the outside auditors. Ms. Misawa Kishinami. She has now involved to the capital market.
In addition to that, she has served as the outside members at more than one companies already. Mr. Mitsuhiro Hasegawa. As a prosecutor, he has assumed many important positions in addition to the Chief Prosecutor. The transparency of the financial report, this is now his specialty. As of the 10th of June, we will have the regular general shareholders meeting. Once the agreement is given, we will have the 12 BOD members. We also have the outside Audit and the Supervisory Committee Members, Mr. Yoshii. In total, we will have the 13 BOD members. As you can check in the skill matrix, these new BOD members will have the diverse expertise and experiences without any bias. In each area, each one of them has rich experiences and expertise.
Even already at the interview phase, they have had now very good document for the current state of the Nidec Corporation, and all of them have shared the high passion to reform the company. However, they have to be braced for the re-huge tasks and the difficulties, we believe that all of them are ready for such difficult tasks. We believe that they are best members to enhance our corporate values. With these BOD members, we are sure that now we can meet the expectations of the shareholders, because they can serve at the tangible of the BOD members. These new BOD members will support the enhancement of the corporate value and the reform continuously. Shareholders, stakeholders, if you can agree with these candidates, it's really appreciated. Thank you very much, and that's all for me.
Now we'd like to go on and explain to you our initiative to enhance Nidec's corporate value. Under even these circumstances, we are united as the Nidec Group going into the same direction. We will be having integrate integrity, and as the manufacturer, we will face the world. We will go forward united. This is the redefinition declaration of the Nidec Group, and this is the second founding phase of our company. We have this five-year Nidec redefinition plan. We have a redefinition of the Nidec Five-Year Business Transformation Plan, and I have to give you details of this plan. We have five different pillars. We will review business portfolio, we will reorganize our group, and we will reform the company-wide IT infrastructure. We are going to have a drastic reform of these areas.
We will improve our ROIC. We will maximize our corporate value. That's going to be our ultimate goal. For that purpose, what we need to do is to prevent aforementioned problems and issues from happening in the future. As the baseline of everything, we will improve the profitability, we will improve the efficiency of the ROIC and invested capitals. You know that for us to become a true global company, we have reshuffled our management. We have a global headquarter. We are going to establish that, including regional head offices. This will be part of the core of our global business system. We have five different pillars, as you can see down at the bottom of the slide. Accountability will be allocated to each one of them. We will make sure to fulfill our accountability to the capital market.
Based on these five pillar notion, we will reorganize our businesses, sales companies, factories, and other entities based on these five pillars. Not only for its own profitability, the each business base needs to be able to contribute to the entire group's profitability. The factories have to be working as the guardian of the entire group's profitability. We need to work with our customers to solve problems together, and we need to co-create values together with our customers. We will pursue the profitability of individual companies. That's what we have done. Going forward, we will continue to transition into the true global company. We will review our business portfolio based on a growth potential and the profitability, concentrating on selection and concentration of our businesses.
We have five different categories for our business bases. We have area where the structural reform is required, we have another area for product portfolio optimization. We have another area for the continuous growth, we have another area for of new focused investment for future growth. We have just started these initiatives, but we have major initiatives, they're all new businesses. As you can see on the far right of the slide, these are the five different categories that we have in place. Down at the bottom, it says business restructuring. It says includes E-Axle. We need to redefine our businesses as we try to decide a future of this business here. Actively invest in human resources, development, facilities, growth investment areas.
Energy storing, energy saving areas, semiconductor-related factory constructions, high profitability potential growth areas. These are the areas and the businesses where we will invest in making wonderful products as well as wonderful solutions for our customers. That's the type of chances we like to grasp and capture. Finally, with respect to defining the new businesses, we need to define new business domains by leveraging technological and social changes. We have eVTOL, inspection equipment producers, et cetera. We will utilize technologies from these areas to enter into the aerospace industry. We will invest sufficient human resources there so that we can be a company to contribute to the future of the humanity.
Based on the aforementioned five pillars, we will revise the business portfolio, and we will boldly execute the structural reforms through a five-pillar-based business structuring and portfolio review. We have a total of more than 300 business bases, and we will cover all of them in our reform. With respect to the number of business bases, we will cover sales offices. We will consolidate these sales offices as part of our business portfolio consolidation, business footprint consolidation, in other words. Today, we have accounting-related matters, and we have technological, technical, manufacturing-related, quality-related matters as well. Given this circumstance, we need a drastic reform of IT infrastructure.
With respect to our operations, with respect to IT in this area, for the next five years, we would like to invest JPY 100 billion for the next five years to establish a firm, sturdy infrastructure in this area of IT. With respect to quality, design, and manufacturing, we have, various data of various components and various design-related data. We need to, consolidate these data in order to create, more efficient, better designing capability. We will invest, make a strategic investment of JPY 30 billion. For the next few years to establish a firm, enhance our manufacturing infrastructure. Design, concept, BOM, process, operations, accounting. In all of these areas, we need to do what is right as we operate our businesses.
More than anything, we need to resume dividend payments as soon as possible after the completion of restatements of prior years' accounts. Based on that recognition, we will provide you with the directions of these four different areas that we have explained to you today. We will share information with the leaders of these areas of businesses as part of our midterm business plan, and we'd like to provide you with the final version of our midterm business plan sometime in the future. Toward the autumn this year, we will make sure to assign people to be accountable, equipped with accountability of all these four areas. We would like to share with you these information as well as we go forward.
As I've explained at the beginning of this press conference, including quality matters identified during the turnaround process, we will thoroughly address all challenges across Nidec and implement the fundamental reforms necessary to restore trust across the group in accounting, quality, governance, and a corporate culture. That's the type of drastic reform we are going to launch. As I've said, accounting, quality, governance, and a corporate culture are the areas in which we are going to make necessary investments to remake ourselves as a company to be trusted. By restoring governance and management discipline as our foundation, we will decisively enhance corporate value, build a high profit structure and evolve into a truly global company. This concludes our presentation to you today. Thank you very much for your attention.
From here on, we would like to accept questions from people in the audience.
Please raise your hand if you have any questions. Before that, please state your name and organization. We'd like to accommodate as many questions from you as possible. Please make sure to give two questions per person. Thank you. We have people from the mass media as well as analysts. We'd like to take turns one by one. First, with the people of the media outlets, please have raise your hands if you have a questions. On your left, the male person over there, second from the first line, first row.
This is Sei of Asahi Newspaper. With respect to the newly found quality-related matters, what about the causes of those problems? With respect to accounting matters, before you made the report published, you talked about the excessive pressure for us to have to achieve short-term targets.
The reports somehow served as a backup document, evidence of your statement. That's something that I found in your report at that time. Was there any pressure on the people on the front line, employees? Was that part of the background of this quality-related issue? Is there something similar to quality issues, compared with the accounting-related issues?
Thank you very much for your question. Thank you. This is something that I've said repeatedly on this type of occasions. Corporate culture, process, and systems are what we need to correct as a company. With respect to the newly emerged quality issues, the direction itself remains the same as a company. With respect to root causes of these matters, the Investigation Committee will investigate into these issues to find their causes.
Some issues may have some the same root causes as some accounting matters. The, anyway, Investigation Committee will find the answers to your question. We will receive feedback from the Investigation Committee, and our purpose is to solve those issues. We need to get together with our customers to solve these problems. In order to achieve the excessively high profitability and sales targets, I believe there has been a pressure, excessive pressure to the frontline employees.
Is that the case, do you think?
Well, with respect to these issues, the one, more than 1,000 cases that we have identified, 96.7% of these issues are the issues, the changes made without customer's approval. These are the changes made to components, materials, processes, and designs. That and other issues will be investigated accurately by the Investigation Committee.
There is one more question from me. Currently, Nidec is in a situation where your stocks is designated as the special alert security status, and you will be having the audit by the Tokyo Stock Exchange throughout autumn this year. In addition to those accounting matters, you have these quality related matters as well. That could possibly made another huge impact on your company, I fear. You have this upcoming audit by the TSE or Tokyo Stock Exchange, and you have these newly emerged or found problems. What type of impact will these issues going to have on your management or company?
Thank you very much for your question. These quality issues are matters are a huge theme for us. As the Investigation Committee investigated these issues, we have had the many issues identified in April.
It's just one or two issues. We can handle them one by one by working with our customers. As of today, the number is more than 1,000. This is going to require the transparent and objective perspective of outsiders, and that's the type of decision we have made. That's the type of decision based on which we have established the Investigation Committee. We will complete this process, investigation process, by the end of August so that we can go and submit our report as scheduled.
How about the impact on these issues on your maintenance of your company as a listed company on the TSE? It's not just accounting issues. Now you have the quality matters issues.
As you said, it's not just accounting issues. We have some other issues.
In that regard, these newly found issues are going to have a huge impact. From the beginning, in the Nidec Corporate Reform Committee, we have had this Quality Investigation Working Group to decide to see if there is any issues to be corrected, if there is any systems to be corrected. That's what we have been trying to find out in, as part of this working group's activities. After the activities are over, we now would like to address these issues.
Thank you very much for your question. That is all for me. Thank you.
Next, analyst in the front row, please.
Thank you very much. I'm Takayama from Goldman Sachs. I have two questions. First of all, I'd like to ask about the misconduct related to the quality, because in one sense, 97% of those events are related to the change of the 4M in the manufacturing industry, meaning that you did not make the notice. In addition to that, there are no complaints from the customers and therefore probably it's not so important for the appliance and automotive. Of course, you mentioned that in the financial impact, which is not known right now. We expect that there will not be so significant issues in these aspects. Is this understanding correct? This is the first point I'd like to ask. How it should be because now the obligation for notice. For example, appliances, very commodity products.
However, if you make the notice for each one of the minor changes, it would be practically impossible. If you miss the notification, to what degree you have to regard these cases as misconduct, and to what degree we can re-regard them as the acceptable cases? Can you please now share the standard for that?
Thank you very much. Regarding the communication for the notice, as you mentioned as the first question, regarding the 4M change. Just because this is a 4M change, just because of that, we should not regard these issues as minor. Once we identified these cases, we have started the communications with our customers. The customers said that, Why Nidec did not inform this faster? There are such feedbacks. We have to seriously consider how we should face with the customers, including communications. We have to review our interactions with the customers. We'd like to take actions for that. Personally speaking, the level of impact in the accounting perspective, I'm not in the position to say anything about it right now.
However, based on these suggestions, accounting team has been established in parallel with that, and therefore, including Investigation Committee, we'd like to share as much information as possible in the rapid manner.
Thank you very much. I'd like to ask about the actions for the enhancement of the corporate values. You have shared the five-year plan as the overall framework. Essence here is related to the Conversion 2027, in my understanding. My impression is that the review of the business portfolio. To what degree it should be drastic. For example, you had to make a really drastic selection and concentration because now you had to identify where you needed to grow and where you have to stop and match the investment. I believe in, the basic approach is something like that, is this understanding correct? For example, the one of the criteria for the review is 5% or 15% and 20%. It should be more than that.
You also mentioned humanoid to grow for the future and, where your position is. Your position is good enough. I'd like to know this. In addition to that, in the midterm indicators Of course, I understand that you cannot disclose absolute numbers. What is the target profit margin and ROI? Of course, the timing could be different because of the midterm plan. At least I'd like to know whether those are not the numerical targets are not changed, especially downward.
Thank you very much for your question. Regarding this portfolio, we have looked into this portfolio in details by having many discussions, as you pointed out, in the Conversion 2027. The essence or core concepts in this Conversion 2027, I believe essence has not changed because essences or core points should be what we have to do.
Once we identify these accounting issues and quality issues, we needed to add more actions to enhance our system and organization. Not all of these aspects will be incorporated into the midterm plan. What you see in this portfolio, the growth investment area and the core area, if you combine these two, it accounts for 60% of the current revenue. Conversely speaking, remaining 40% of our business should be reviewed to consider how we can reform these areas. That is my personal understanding, including these areas, we'd like to have further discussions internally. Regarding the targets, we have made many plans under the targets. It shouldn't be the way we work, we intentionally don't mention any targets here.
Thank you very much.
Now, the person in the front row, the second from the right.
I'm Murai from Diamond.
Thank you very much for this opportunity. I'd like to ask two questions. First of all, this time, together with the new BOD members, you will have five new areas where you have Vice Presidents, I assume that are related to the appliance and automotive machinery and the small motors. I believe these business lines are maintained that in accordance with that, there are new changes in the executives and the VPs. However, the HR change as well as the personnel changes in the subsidiaries, do you have any plans for that? For example, there's a point made in the third-party report saying that you have to move away, move away from the impact or influence of Mr. Nagamori. Therefore, I assume that there are someone who is close to Mr. Nagamori.
In addition to that, if I use the words of Mr. Nagamori, the assignment of his protege is very important internally. Understand it. Therefore, the so-called protege of Mr. Nagamori will be assigned to executives or Vice President or the level of the trust of Mr. Nagamori is one of the criteria to assume important positions.
Thank you very much for your question. It's very important for us. As we have mentioned over and over again already, as Nidec Corporation, we'd like to respect the process, culture, and systems. These are most important three imperatives for us. Ms. Sakai, as the Chief of the Committee, mentioned how we should nominate the new BODs and executives, including that process. We reviewed it too. With that, we are sure that our reform can ensure high level of transparency. These are the five business pillars as you see here.
You mentioned that these five areas follow status quo. It's a really chagrin because we'd like to converge these five pillars. Under these five pillars, including group companies, we'd like to reform and restructure our group companies. Including those points, we'd like to continuously restructure ourselves for the future. At the best timing, we'd like to share new structure. Now, Mr. Minai, who is in charge of the HR, would you like to add some comment?
Thank you very much. I'm Minai, in charge of the HR matters. On the 3rd of March, there was a report made by the Committee. By taking this opportunity, as you see here, headquarter, business sites included, we changed the leaders quite drastically, and I believe that is one of the characteristics in this time of reform. Traditionally, there has been strong leaders.
However, we changed these leaders to facilitate these five businesses. In order to have strong leadership, we have new leaders. All of them are newborn leaders, and therefore, together with Mr. Kishida, they will work on the team building to lead new reborn Nidec. Not only that. So far, Nidec leadership has been led by founder. However, new leaders will work as one team. Such diverse leaders will be garnered across the globe. That is our intention, and therefore, personally, there are new leaders, including new executives, because now we have introduced a so-called the secondary system, where new executive candidates will be put together for the further growth. We can expect there'll be the new generation of leaders. That's why there are quite a lot of new members, and we are confident in having these new members.
What I'd like to emphasize here is that we needed to grow the next generation of leaders more and more globally. You mentioned that the Head of Vice Head of the Department. Yes, exactly right. We needed to nominate and identify the next- generation of leaders to ensure their growth. Therefore, we'd like to implement so-called the succession plan to collect the right human resources across the globe. The establishment of this type of new leaders can be the one of the cores for the new Nidec, and we are very happy to share that.
When I look at the current incumbent, including Vice President and executives, as well as the Presidents of the subsidiaries, do you have any plans to change them?
If so, probably some of them are really close to Mr. Nagamori, but how you can ensure this on the distance with Mr. Nagamori, rather than how close or how distant they are.
One thing I'd like to say is there are quite a new members here. In parallel with this, we established the Committee to investigate accountability and responsibilities. There were third-party members involved this committee. If misconduct or anyone who should assume the responsibility, we needed to consider the change of such personnel. In addition to that, the result of the Third-Party Committee was completed in April. Therefore, we now analyze the contents of the results of the Third-Party Committee. Whenever necessary, including group companies, we are ready to change management and leaders. However, we have to consider what to do from now on.
It's TBD.
Thank you very much.
Now, Wada for the Mobility Innovation. He is the president of the Mobility. In other words, the person in the group company will be the Vice President and executives. I see his name, Niitani, he was the President of the one of the subsidiaries. However, he will assume the position of the top of this business category, I believe that is one of the important things. As you heard already, who is closer to whom, who is under the sphere of influence, those aspects are not included in the qualification aspect or the nomination criteria. As I asked this on the 3rd of March, back then Mr. Nagamori was establishing who the his own office nearby.
At this moment of time, where is Mr. Nagamori? Mr. Nagamori comes to Nidec. How you communicate with Mr. Nagamori right now? Can I ask this question to Mr. Kishida as the president?
Thank you very much for your question. Regarding the Chairperson office, there's nobody. It's totally vacant. Mr. Nagamori does not come to the office at all. As one of the shareholders, we take appropriate action.
Thank you very much. That's all. I'd like to move on to the second question.
Here's my second question, which is for Ms. Sakai. You are an outside member of the Board of Directors of the company, and there has been a very drastic shuffle. With respect to the functions to be played by the outside members of the Board of Directors, do you realize that you are, you have not been able to meet or play a sufficient roles as the outside Board members? Is that the reasons why all of these outside Board members are leaving the Board this time? There have been various issues, such as the information not communicated very well to you and other Board members, but can you please comment on that, please?
Thank you very much for your comment. I would like to take the question and issue you have pointed out sincerely.
As part of the nomination committee of the company, I would like to say that we have received a report from the Third-Party Committee, and based on the committee's suggestions, we wanted to secure people of diverse expertise. We need to strengthen the company's governance. We need to grow our company's capability. We have secured appropriate persons to be on the Board this time.
From the Third-Party Committees and other organizations, there have been many issues pointed out. Do you have any anything to say as part of the committee? Something you have learned, for example?
I take that kind of situation very sincerely, seriously as well, as the part of the board of the company.
As a member of the Board of Directors of the company, I have made a lot of suggestions, proposals, opinions. Risk information has not been fully shared with everyone. We have not been able to understand the reality as members of the Board. In the past, we have received issues. We have received reports on issues in the past. We have suspected, we should have made some questions regarding our possible organization issues.
We would like to cover as many questions as possible from the audience, please make sure to keep your questions, number of questions, two per person. Analyst, please, over there. Thank you.
This is Seto of Morgan Stanley Securities. Thank you very much for your presentation. I would like to keep my questions to two. Two questions.
I would like to ask you about the timeline going forward. June 18th, according to you, is the day of the Shareholders' Meeting. Is it correct to understand that you won't be able to prepare all the financial statements by then? What is the completion rate of these financial statements? What will be the right timing for you to be able to submit all the financial statements as a company? With respect to the replacement of business portfolios, reshuffling of the business portfolio, you are trying to reduce the number of business spaces to 180 or so. What will be the timeline for the reduction efforts?
Thank you very much for your question. To answer your first question, I would like to have Nakagawa-san answer the question.
Thank you very much for your question.
At present, on April 17th, we received a report from the Third-Party Committee regarding the corrective accounting work for the past five fiscal years. We have worked on that. In addition to that, we have had, now have the quality-related matters. We are currently examining the financial impact of these quality matters. We have a statutory deadline for our financial statements, and we are currently reexamining our schedule for us to submit the financial statements. With respect to the submission of financial statements for the past fiscal year of 2025, we would like to take appropriate measures in accordance with the rules and regulations and instructions. With respect to business portfolio consolidation, we give ourselves a deadline up to 2030. Something we can start from this fiscal year, relatively soon.
Those are deeply discussed as part of our midterm business plan. I would like to share those information with you when, whenever the timing is right for us to do so.
At this moment, you are yet to determine the exact timing for you to disclose the midterm business plan.
I would like to make it happen as soon as possible before temperature decreases, before winter comes. In other words, 'cause our top priority is as follows: We need to submit the written confirmation of internal management system, and we need to complete our securities report first. Thus, we would like to completely solve account-related matters. With respect to consolidation of our businesses, we would like to start working on those issues in parallel to our work on account-related issues, matters. Thank you.
Thank you very much.
Here's my second question. With respect to the new members to the Board of Directors, they have been selected already in my understanding. With respect to R&D and the business portfolio, how the Board of Directors is going to have discussions with the executive management, what type of advice should be requested to the Board of Directors or is being requested to the Board of Directors?
If I may answer the question, I'd like to have Minai-san, if he has any additional information to give you. Far, I have been stating that the proposal of the business plan and the contents of the midterm business plan are the priority, should be the priority to discuss in the Board of Directors.
As I've said it before several times, with respect to the improvement of the business portfolio, I would like to discuss various issues, relevant issues with the Board of Directors as well as the management executive function of the company.
This is Mr. Minai speaking. Under this new management, we would like to establish a new firm governance system. We will have external advisors, and we would like to utilize other companies' cases as benchmarks. Based on them, we realize many issues. There are many issues that we have that need to be solved. We need to have a investment strategy. Compared with the other companies' investment strategies, we need to have a lot to learn. We are receiving various advices from various people from the outside.
We would like to learn from other companies as we try to establish and try to introduce new systems into our company under the new management rules. Thank you.
There's someone from the news media. The person over there on the front row, over there on the far right.
Thank you very much for the explanation. This is Hirokawa, Nikkei newspaper. I would like to give you a question on quality matters. Now, all of these issues are related to so-called foreign changes, and other issues are country of origin related issues and data falsification issues. There are any possibilities for illegal activities. I believe these are very heavy management related issues. How do you think about your own as well as other executives' responsibility with respect to these issues?
Are there going to be any actions, penalty or disciplinary actions as a result of these?
Should I would like to have Minai-san explain the first part of my question first, followed by my own answers to your question. With respect to illegal issues, we have not identified or we have not received any report on illegal acts with respect to the aforementioned. Which is why we need to discuss with the external experts about these issues to find out if there is any illegal activities or not.
This is Mr. Kishida speaking. Based on the result of the previous report, I decided to return 100% of my executive compensation to the company for a while. With respect to the recently identified quality matters, we need to do what is right.
We definitely need to address all of these issues. We need to understand any and every issue that we need to identify. That's the issue that I need to work on.
Thank you. Here's my second question. With respect to your business policy, how your upcoming measure is going to prevent the future issues from happening, future problems from happening. The accountability to be on these business basis leaders will be very different from Mr. Nagamori's one-person dependent style, and I believe that that will increase the level of responsibility of these individual business pillars and bases. Can I ask your opinions about how you are going to prevent these issues from happening in the future?
Here's what I'd like to say to you in response to your question. We have this Conversion 2027.
In addition to that, we need to further improve governance functions as well as doing what is right. These are the major points of our midterm business plan. One thing that I'd like to say that, as you have pointed out, this, it's not just one person looking over everything or monitoring everything. It will be a group of people, leaders, monitoring individual businesses. With respect to CFO function, for example, we have a CFO of each of these businesses. They will be directly reporting to the CFO of Nidec's Head Office. We have legal leaders of these business bases will be directly talking, communicating to the CLO, Chief Legal Officer of Nidec's Head Office. That will be a huge governance merit under this new system.
As I've explained to you today, with respect to system-related issues, quality-related matters. For example, if you try to reduce the cost of component, you may replace component with another one that will require design change. We need to understand that everything is connected with each other, constantly, consistently. A firm certificate will be necessary under such a process. We'd like to establish such a system where everything is connected and no one can falsify the data by making unauthorized changes.
Thank you very much.
Someone from the analysts, please. The person over there.
This is Hirata over UBS Securities. Thank you very much for your time today. I would like to give you two questions. Here's my first question. First related to the quality issues.
How are they going to impact your company's performance? You said the main business We are doing very good, successfully with our main businesses. Under the current situation, how are these main business going to be impacted? What will be the type of impact that you are expecting from your customers? With respect to this number, 1,000, how much of percentage of the entire sales is going to be with respect to these 1,000 issues?
Nakagawa-san, please start thinking about answering the question. I would like to answer the first question from you. As of today, we have been communicating these issues with our customers. As I've said, many of these issues are regarding or in relation to our appliance issues.
With respect to automotive businesses, For one of the, one of the issues is with the cockpit plastic material. Many issues are like that. Of course, we have been reprimanded, complained by our customers saying that how come we are so late to inform them of such issues. Going forward, we will have a very proper communications with our customers to provide them with accurate information so that we can do business with our customers sincerely. As of today, with respect to our sales, So far there has not been many negative impact on our sales because of these problems, issues. Going forward, we may ended up in losing the customers' trust in us. We need to avoid the situation.
We would like to handle these individual issues one by one, very politely, and we are currently communicating with our customers as of now today.
Let me explain from Nakagawa. Actions for the 1,000 issues. There are no clear actions yet. As we have explained, some of them are related to appliance businesses, and therefore, ratio to the total revenue will be calculated from now on.
Thank you very much. Regarding the second question, this is actually the confirmatory question. You mentioned that you are reconsidering with the overall timeline. If you consider the due date of the securities report as well as this due date for the confirmation documents, there are some due dates you have to follow. For these matters, you will follow the plan that you have already shared with us. If there are any changes, please let us know those changes.
Mr. Nakagawa, please.
Thank you very much. Regarding the due date for the securities report.
We have to identify the level of impact due to the quality issues. In other words, we have to identify the impact level of the misconduct and the quality. We have to identify the level of impact as soon as possible. That's why we have established the Investigation Committee. They are not Third-Party Committee because we needed to get the information and feedback timely. Therefore, together with Investigation Committee members as the financial group, we needed to identify the level of impact as soon as possible.
That's all for me. Thank you very much.
Yes. The person from the [Asahi Media], the second from the left. I think you are in the third row from the front.
I'm Mori from Toyo Keizai. There were quality issues at Nidec Techno Motor and other companies.
When it came to the Techno Motor in June 2022, Daikin, Mitsubishi, LG, Johnson Controls. These are the companies related to the motors for coolers, without any acceptance from the customers, without any consent from customers, you made changes. I believe you are the executives, Mr. Kishida, you are aware of that?
Yes, I was aware about the reports. When it came to the direct control over those issues, in that sense, I didn't know those issues. When it came to the report, yes, I'm aware that there were reports on that, we have taken action to that. Instead of identifying these issues in the reform process, when whistleblowing was made, you have already known this.
Regarding the quality issue for Techno Motor in June 2022, including relevant customers, we tried to resolve the issues. Regarding the issues that have been identified this time, this Techno Motor issue is not included. Back then, including the group of companies, there was no across-the-board inspection. Unfortunately, there was no such overall review of the quality issues involving all of the group companies. Together with the establishment of the reform committee, there's a group-wide Quality Investigation Committee. Once this committee was established, we finally are aware about the important reports and the quality issues in April. That means that up until now, since the quality issue in 2022, there was no awareness of such issues, including whistleblowings.
If Mr. Minai could comment furthermore for the whistleblowing back then, can I ask for your comment?
Sure.
There are similar issues involving 4M changes, each time we have investigated them, whenever necessary, we have taken appropriate action. Needless to say, we have explained the situations well as part of our actions.
Thank you very much. Let me move on to the second question, this goes to Ms. Sakai. You mentioned that you should have been more proactive to ask for what happened. In the sense, in 2022 and 2023, including Diamond, there were many reports related to the governance issues. Once again, because with these reports, why you did not believe that you had to investigate the governance issues in more depth?
Thank you very much for your question. I'd like to take this, your comment very seriously.
It's the fact that the information was not appropriately shared. Whenever each report was raised, we should have taken CAPA actions. We have to do that duly. In addition to that, we have to confirm whether the CAPA plan was executed. We needed to check the progress from time to time.
There was a pressure from Mr. Nagamori. Are you aware of such an pressure or issue?
Certain information regarding with excessive pressure from Mr. Nagamori was not shared, actually.
Thank you very much.
Someone from the analyst. Thank you very much. I'd like to open the floor for the entire Q&A session. First of all, can I ask for your question?
Thank you very much. This is Nagai from Nippon Keizai.
This goes to you, Mr. Kishida, because you mentioned that now finally you could understand the quality issues in April. Working group itself was established in the 8th of January, but why so many e-reports were raised in April? What's your take?
Thank you very much for your question. We needed to see the result of the entire issues. On the 3rd of March, we have made announcement for HR matters, new structure or new organizational structure started to launch in April. We ensure that everyone should be able to speak up more openly. We have taken such initiative to do anything right, as a first step to do right things in the right manner. I believe that's why there were so many reports raised. This question is related to the question of Asahi Newspaper.
Due date for the confirmation document is the October 28th. The investigation of the Investigation Committee is expected to be completed by the end of August. The schedule is very tight.
Regarding the assurance or submission of the confirmation document of the internal control slated for the October 28th, how you can ensure this due date, in that real time is quite short. You needed to wait for the reports from the Investigation Committee slated for the end of August, for example, the continuous review is considered to pursue the lift of the securities on alert.
Thank you very much for your question. Yes, on the October 18th, this is the due date of the submission of the plan for the internal control. There's no change for this at all.
Regarding the Investigation Committee, it's said that the investigation should be completed by the end of August. Whenever issues are identified, feedback will be made to resolve issues one by one. We believe that we can resolve the quality issues, and we can see the due date of the end of August. Regarding the interactions with the authority, can I ask you, Mr. Minai, to share your view?
Yes, we ensure good communications with authorities, and then at the end of October, we can issue the confirmation document. As you pointed out, from now on, we have only five months to go. Time is limited. Still, we have to ensure good resolution. That's why we'd like to work together with the Improvement Promotion Office, as well as the Investigation Committee to ensure speedy actions.
Results coming from the Investigation Committee should be shared in a timely manner. There are improvement plans already submitted. If actions captured in this Improvement Plan is not sufficient, we will prepare the additional actions to seek for timely resolution, then we believe we can resolve all of these remaining issues at the end of October.
Just a confirmation, Mr. Kishida. In this sense, the 28th of October, you need to proceed this approach to lift the securities on alert.
That's right. In order to achieve the lift of securities on alert, we'd like to take these actions, that's why we have to follow the due date of the 28th day of October when we have to submit the internal control document.
Thank you very much.
The person in the pink shirt.
I'm Tsukaoka from Nikkei x Tech. Thank you very much for your time. You mentioned that the four changes were not so important. However, regarding the component change and design changes, I believe all of these changes are significant. Therefore, why you can say that there's no negative impact onto the functions and safety? Based on what you can say that, especially from the technological perspective, can you explain why there's no negative impact onto the safety and functions? The other point is related to the number of the misconduct. Someone mentioned that the event of the part changes in 2022, this 2022 issue is not included in this 1,000 issues. Therefore, I'd like to know the period where you identified these 1,000 cases.
For example, around in FY 2016 and 2017, there it's the huge issue on the quality in Japan, and there's a falsified document related to the quality back then. I'd like to know whether there were any due date, and if there is no clear due date, I'd like to know how and why you set such a due date to resolve the quality issues.
Thank you very much for your question. We didn't mean that no 4M issues are not significant. We didn't mean it at all, because no 4M changes are very significant to that, and we have to take actions, and we will take actions too. That is the first point I'd like to emphasize. Now, regarding the investigation this time, this investigation is conducted in parallel with the Improvement Promotion Office establishment.
Therefore, the target of the investigation is from FY 2020 to FY 2025. For this target period, we made interviews, we try to identify all of the issues. However, that timing alone is sufficient to make the report, especially for the quality issues. No, it's not sufficient. We don't draw the line to identify any quality issues. In other words, whenever the suspicious cases are identified, we ask relevant people to make the reports. Of course, now we need to wait for the result of the investigational committee of when these specific issues happened and how. Why there is no impact onto the safety and function? We said that 96.7% are related to 4M changes, and many of them are related to the appliance business, especially within the appliance.
Many of them are related to cost reduction of the parts and the components because now when parts are changed, BOM should be changed, and therefore, M BOM and the engineering BOM should be changed in accordance with them. In this sense, design verification should be done. Then, when parts and components are changed, technical verification should be implemented. Of course, we have implemented the verification of the technological verification. However, together with customers, we'd like to review whether our actions are appropriate. In addition to that, as we have explained in the organizational structure, there's also a technological team.
The result back then, were right or not, we'd like to review it too. Thank you very much for your question.
Thank you very much for your response.
The person in front of the previous speaker, please go ahead.
Thank you. This is Takase of The Denki Shimbun. I'd like to give you one question only. If you can go to slide number 26, where you talked about the structural reform, you said you will focus your energy on this work. You talked about these five pillars, including Mobility Innovation, on slide number 24. I believe details are something you're going to disclose going forward. In the automotive area so far, you have focused on E-Axle, among others. Going forward, are you going to shrink this business?
You used to say that you work as on motors, individual motors, production of individual motors, et cetera. Are you going to focus on different types of products or services such as solutions? Can you possibly provide us with your latest information about what you would like to focus on?
Thank you very much for your very precious question. A very important question. The E-Axle will be the first thing that will come to our mind with respect to the automotive business. That's something we need to be very reflective of. If you take a look at the chart here on the slide, Mobility Innovation includes E-Axle, as well as on the blue section of the electronic commercial vehicle, automotive motors. Under the green section, two wheel vehicles, flying vehicles.
This is going to be our next step as we track the business going forward. That's the type of Mobility Innovation that we'd like to achieve. With respect to E-Axle, we are in a struggle. As we speak today, we are in a struggle. We have been struggling up until today. Through this process of a struggle, we have been able to understand and acquire power based on the trinity of different capabilities. We have been able to learn from making highly sophisticated products. With respect to NEDO and other projects, we have been able to learn many lessons as well. With respect to E-Axle, I like to say that the vehicle technology, car technology is going to continue to evolve. We'd like to be involved in this process. Thank you very much for your question once again.
Thank you.
On to the far right, the person wearing a cap, please.
This is Miyajima of Monthly FACT magazine. With respect to this Nidec instance, heard that it is supposed to be due to Mr. Nagamori's excessive pressure. All the elements are supposed to be gone, and there has been excessive pressure-based cost reduction. That's something easy to imagine. How come in the accounting investigation, how come this issue was not revealed fully? Sakai-san and Kishida-san both said that it was the end of the last fiscal year. Yet they said these issues came to light. It doesn't convince me at all. Sakai-san has been in charge of the staff since 2020. That's I believe your negligence of your duty. You, Kishida-san, you are originally from Sony.
The making changes unauthorized by customers is the betrayal of the customers. You talked about the three people organization is going to solve everything within half, six months or so. That doesn't really impress me at all. With respect to more respect to incidents that are impactful to the society, are you going to make any investigation based on findings? Are you really sure that you are going to regain trust from the market? How many people have you deceived? Those are not really part of your explanation at all. Kishida-san and Sakai-san, I would like to ask, this is, I believe, is the gross negligence.
You're making a huge mistakes on two different phases. You have these issues found at this phase of the investigation, by betraying or by sacrificing trust of the customers in Nidec, you have grown so far. I don't think you are understanding the reality very clearly. Sakai-san, especially, don't you think what you did was the very negligence of your responsibility?
Thank you very much for your comment. I take this responsibility very seriously. These issues themselves represent the fact that the something we have, we should have never let happen. Based on that lesson we have learned, we have started voluntary inspections from this past January, and in this investigation, we will do our very best to identify and address these issues as fully as possible.
We have this notion as the basis of our manufacturing, and that's a part of our improvement going forward.
Sakai-san, what you said is that these are people of a very different background, but you are an outside member of the Board of Directors. You should have done a better job, Mr. Nagamori should be here talking to us, giving us an explanation about how things were back then. Outside Directors are here, Mr. Nagamori should be here talking to us. Otherwise, I'm not going to be convinced at all. It makes me wonder how the TSE is going to forgive Nidec. Based on Sakai-san's lesson, I believe these people have been chosen, but I really don't quite understand the actions you have taken.
Thank you very much for your comment. I take this responsibility very seriously. With respect to quality is the basis of our company as a manufacturer. As the investigation conducts its investigations, I believe everything will be clear in the future.
Any other questions from anyone? The person wearing glasses over there has been raising their hand for a long time.
This is [Shahara Bukkyotta Newspaper]. Thank you very much. I'd like to ask a question regarding the changes made to components without approval of the customers in the area of appliances. What type of products, what type of components were replaced by what type of components? Can you give us any example?
I will have Minai answer the question, and I would like to provide you with some additional information as necessary.
I'm talking about the mold renewal, having additional molds. These were done without approval of our customers. With respect to resin components, for example, molds became too old and have to be renewed. That's one of the examples that I can give you. We need to make the mold production more efficient. In order to do that, we had to add molds. Such addition was done without approval of the customers. Another example is that we, when we were trying to automate the manufacturing process, part of the process was automated without approval of the customer. Another example would be the change in the manufacturing method and a partial change to the production process. These were some of the cases among all the cases we have found, identified.
With respect to material changes, did they happen as well?
With respect to material changes, there are some cases with respect to material changes. Those changes, unauthorized changes, were never reported in the past. Durability, declaration, et cetera, could happen as a result of these unauthorized changes. At this point, we have never been reported, such changes that affect, that make such effects. We will find out as the investigation goes forward.
Here is my second question. There are some issues with the inaccurate testing results or testing data. Was that a intentional falsification of data or intentional change of country of origin? In a shipping inspection, for example, data from the inspection were of the substandard data were judged as accurate or sufficient data.
That will be part of the Investigation Committee's investigation, so that we can prevent from such cases from happening in the future.
That is all from me. Thank you very much.
Any other questions from anyone? The person second from the left, the lady over there.
This is Tokuda with Toyo Keizai. Thank you very much. A majority of these 1,000 cases are related to appliances. Can I ask why that is? Is that a type due to the structure of the business that so many cases have happened, or is that the specific events that have caused such issues?
Thank you very much for your question. The root essence of these issues will be identified in the investigations, Investigation Committee's investigation, in my opinion. We have automotive businesses, IT, part of the IT businesses.
In some areas, we can make decisions on our own. Some, in some other areas, we need to work with our customers to go forward. There are some structure restrictions that are applying to us in some areas of our business. You could call it the degree of freedom. In appliance section, there is such a degree of freedom as to making changes. Investigation Committee will clarify those and other issues as well.
Here's my second question to you, Ms. Sakai. With respect to these talented people that are candidates to the board of directors. Even if or however talented they may be, they need to be able to express their opinions freely. One of the previous questions to you was that you neglected to understand the issues in Nidec Group.
What type of criteria did you use to select these candidates? How come, what makes you confident about these people are the best candidates?
Thank you very much for your question. In selecting these candidates, we utilized the governance improvement and one more important elements, corporate culture improvement, et cetera, were the elements we focused on. We wanted to choose the best candidates for the company, and that's what we did, I believe.
For example, pressure resistance, as well as the better identification of the potential risks, I believe these are the important soft powers, and is that not included as one of the criteria?
Yes, because we have very meticulous interviews, we got very good observations.
As you pointed them out, we believe that they are the best BOD candidates who can take actions for those matters, too.
Thank you very much.
The person over there.
Thank you very much. I'm Katsura from SMBC Nikko Securities. I have just one question. Direction for the reform involves a good culture system and process to make sure everything is right. Depending on the people, culture can be born naturally. The corporate culture should be created intentionally. This is the common concept. When you look at slide six, I can see portfolio 2026. Of course, you will review them from time to time, and you have to consider the external human resources and existing employees. There are maybe many people inside Nidec. If you try to enhance your corporate values, what are the messages you'd like to share to promote the changes while enhancing corporate value? Can I ask this question to Mr. Kishida to share your message to everyone?
Thank you very much for your question. To me, under this situation, we needed to consider what we can do, and actually we have thought about it for more than six months. What are the values for Nidec, and with that values, where we have to move on? We have considered these topics, and then we have identified that the two Monozukuri splits and Unjibun splits. These are the very important, and therefore, we'd like to maintain these two splits. Not only within the company, we have to look at the world, and we have to work with partners, customers, and employees to move forward. You can see that in our message, our mission, and therefore, under this mission, we'd like to develop the midterm plan. If we reset everything to do right, and then it's not about just an extra step.
Personally speaking, Nidec itself should be redefined, and that is why we have made the declaration about redefinition.
Thank you very much, but I have one follow-up question. If you consider current status, revenue has been good, and that is only one communication we've got. However, you are going to change portfolio, and then the way the company exists will change inevitably. Therefore, portfolio alone would not be the important piece because Mr. Nagamori established a huge, the threshold or hurdle of JPY 10 trillion , and that has been the starting point. I don't know whether the future plan entails five years, 10 years, or 15 years. Important thing is not what KPIs you appreciate. I expect that you can share the clear KPIs.
Thank you very much for your suggestion. Thank you very much.
Now, the person second from the right. Yes, the person in the fourth row.
Thank you very much. This is Sakurai from NHK.
I'd like to ask this question to Mr. Kishida. First of all, misconduct for the quality issues. The number of such cases is more than 1,000 according to the presentation material. Is that the right size? For example, it's not about 2,000, or 3,000, or 10,000. If you say more than 1,000, all of them are within the category. I'd like to know the level of the numbers of those cases and how many vendors and suppliers are related to these quality issues. If you consider the final products on the appliance domain, what are the typical final products?
Can I answer to your question first?
Yes.
First of all, the number of quality issues, more than 1,000.
Roughly speaking, the number is around 1,000, and that is the size of the issues in our understanding.
Next point, impact onto the customers.
Actually, we are still in the discussion with the customers. In addition to that, there's the contractual issues, and therefore, please allow me to refrain from replying to this question.
For example, it says 3.3%, meaning that it's around 30% to 40%. I believe that is the right level. First of all, the population number is now more than 1,000. How about the final products of appliance domain, air conditioners, refrigerators? What are the final products?
Actually, these are used in many products. For example, one motor can be used in many places.
Therefore, regarding final products, together with customers, we'd like to determine what we are going to do, and we are in the process.
The second point, that is the background of the misconduct. I understand that the detailed investigation will be conducted from now on, but so far, I believe you have conducted interviews with employees. Through those interviews, what are the major reasons or background of why these quality issues occurred? If it's possible, can you please share the results of the interviews with the employees?
Mr. Minai, can I answer to this question first?
The, these issues have been identified in the wide range of investigations and inspections, and that's why we needed to ask the investigational committee to identify the root causes of these issues. What we heard so far is similar to the background for the accounting misconduct.
We needed to look into more whether the root cause is limited only to that or more than that. We'd like to wait and see the results of the Investigation Committee reports.
I believe Mr. Kishida mentioned that the root cause are similar to the ones in the accounting misconduct, but not why you have reached to that conclusion. The major main objectives are therefore 4M chains related to the cost reduction. This is very mundane things for the manufacturing industry.
Actually, we had to do this because now we should be able to offer the same value with lesser cost. However, we should not be trapped by the cost reduction alone. That is my personal principle. At any rate, we'd like to wait and see the results delivered from the investigations, and I'd like to share the results with you.
Speaking of four changes, these 4M changes should be informed with your customers. All you have to do is to do it, but you didn't do it. Is that due to the cost reductions, that's alone?
Probably cost is one of the pieces. Because now our production capacity is limited, but if the orders are really huge, we had to consider how we can meet such high orders. There were requests from customers asking us to reduce costs as much as possible, and we have taken initiatives. Because of that, sometimes, we did not make the duly notice of the 4Ms. At any rate, we'd like to take right actions based on the results of the Investigation Committee.
The second from the left in the third row. Lady please.
Thank you very much. This is Abe from Nikkei Kin-yu newspaper.
Quality issues and its misconducts. I assume that the product related to the misconducts are motors in my understanding. Are there any products related to the quality misconducts? The second point is related to the number of cases. 1,000, as you mentioned. This is a result of the inspection. Regarding the number of products where quality misconducts were involved, how many of them or how widely the products are related to the quality issues?
Regarding the product related to the quality issues, we understood all of them are motors and where those motors are used. They, there were wide diverse products. Now we have not identified which products are related to those motors, that's why we have to wait for the result of the Investigation Committee.
Speaking of motors, there are many types of motors, small motors and midsize motors. All you can say is a wide range of motors or many of them are related to the small motors. Within this category, for instance, motors for home appliances. We can see a certain level of sizes. In addition to that, some IT products are related to the suspicious cases of the misconduct. However, in the IT domain, the size of motors are quite small. However, we have already started discussions with the customers for IT domain and therefore some of the actions, including the solutions, are being taken.
Thank you very much. Although the, we plan to conclude the session at 7:00 P.M., but there are some people who needed to ask questions. Therefore, let us continue.
Thank you very much. This is Kanai from Yomiuri Newspapers.
Regarding the background of how these now, the quality issues were identified, you mentioned that an inspection of the Nidec Corporate Reform Committee have identified these issues. This committee was established to lift, the securities on alert nomination. The inspection for these qualities should be deeper because someone should take the lead to study the quality issues. There have been already similar quality issues happened. That's why you launched such inspection and investigations.
Thank you very much for your question. The Head of the Reform Committee, in order to assume this position, we had to consider the core of the, our business, that is Monozukuri manufacturing. That's why we needed to prevent anything wrong from happening in the quality domain similar to accounting misconduct. That's why Quality Working Group was established under the Reform Committee.
Within this working group, what Nidec has to do to prevent the misconduct from happening just like the accounting misconduct. In order to do that, we needed to know the global situation. Through the discussions within the working group, we have determined to conduct a group-wide inspection, and that's why we have started that now, the group-wide quality inspection starting this year.
When you came up with that idea because of the previous cases, that's why you have reached to this action?
No. No, not at all. Just because of the several past cases, we have determined the Quality Committee. No, we need to reform Nidec, meaning that now we have to look at many aspects related to the Monozukuri manufacturing going beyond accounting because now Monozukuri is a core of our business.
We needed to review the system, process, and scheme. We needed to identify the necessity for that, and that's why we have established a Quality Working Group within the Reform Committee.
Thank you very much.
This investigational committee is expected to complete their tasks by the end of August. When I look at the previous cases, investigations of the quality misconduct, sometimes it takes a long time, longer than one year. Now considering those past cases, three months would be very short. Just like the Third-Party Committee, final report will be issued, or all the necessary tasks will be completed by the end of August.
This will be a group-wide effort when it comes to this Investigation Committee. With respect to this Investigation Committee, these attorneys, who are the members of this committee, are professional in their respective areas. They have expertise, and they have transparency, and they have enough knowledge that are appropriate for this committee. Every time there is a problem, we will take appropriate actions, and we would like to finish everything by the end of August. This Investigation will be targeting from 2020. In the previous investigation was launched to cover from 2020 through five years or so.
What about this committee?
We will cover this 1,000 cases.
We would like to discuss the range of the investigations going forward.
Thank you.
Next question. Next person. The person sitting right behind previous speaker.
This is Yamada of Toyo Keizai. While ago, Mr. Mori asked you about Techno Motor related question. Other than that, there are 10 plus some whistleblowing cases. According to what we were told, all of these issues were resolved one by one. All of these issues were solved, and these issues are not included as part of this present investigation that is ongoing. Are there going to be any chances for these past cases to be disclosed in the future? Back then, these past issues were solved but never disclosed. Is that the correct understanding?
20,000 other companies has similar issues. It could be too late for me to talk about this, how come Nidec didn't disclose such issues back then? When they were trying to solve these issues internally, can I ask your comment about this whistleblowing cases trying to reveal these cases to the public?
We launched a group-wide quality check. We established, yeah, whistleblowing tools. We have a voluntary checking. It's not whistleblowing through which we found out these cases. It's not that we solved these issue internally, but we discussed these issues with our customers to solve these issues eventually. That's first point that I'd like to make.
When I say internally, it's even if you solve these issues in communication with your customers, is it correct to say that these issues were never disclosed to the public?
With respect to these 4M changes, your understanding is correct. Those past issues were never disclosed.
Looking back all those solved issues or issues solved with your customers, do you have any plan to disclose those past issues that are already solved?
When it comes to how to disclose what issues, I would like to discuss with the Investigation Committee.
Here's my second question. In addition to accounting issues, you have quality matters, part of which we have already reported. Now, all of these issues are out in the open.
Now, it makes it more clear that the more Makes it more necessary for Mr. Nagamori to come out and explain all of these issues. Is it possible for Mr. Nagamori to come out on the stage to make an explanation? What is your comment on that, Mr. Kishida?
As I've said before, as a company, we need to improve corporate culture, processes, and systems. That's where we are focus should be. We're not going to trying to find someone to be responsible. Mr. Nagamori is no longer with us. He's completely away from us, and that's how we would like to continue to treat Mr. Nagamori.
Please make sure to keep your number of questions up to two.
How about what is the current status of Mr. Nagamori's memorial hall? Can I ask that question?
Yeah, please go ahead. Yes.
The construction has halted, is halted with respect to Mr. Nagamori's memorial hall. Next question, please.
The person on the back over there who has been raising his hand for a long time.
This is Harigama of Asahi Newspaper. I'd like to ask a question about the personal assignments of the board of directors. One person resigned from the office based on his or her own will. Can you explain that point, please? Please correct me if I'm wrong. All the other ones have had their tenures expired, expiring, so this person in question has been one of their corporate auditing committee, and this person has decided to leave before his tenure expires. What is the reason for this person to have decided to leave the office?
This time we have decided to reshuffle the members of the Board of Directors, to be replaced by many new people. We decided to have this new group of people to replace the existing members.
This person who decided to leave office before their tenure expires, is he feeling responsible? Can you please be more specific about the reason about this person's departure?
This person's departure is based on his or her own decision.
I would like to ask you a question, Ms. Sakai. What type of a person was he to you?
Thank you very much for your question. As I became the member of the Board, Mr. Nagamori was CEO of the company, up until his resignation from office, he was one of the executives who were leading the company.
That's not answering my question. What is your assessment of Mr. Nagamori as a Board of Directors?
Well, that he grew Nidec to be a JPY 2 trillion company after founding this company himself.
Has your assessment changed somehow now?
Well, he has constantly aimed high. That attitude has created excessive pressure in people below him, and information about excessive pressure hasn't fully communicated to me.
What is your assessment of this person as a leader?
All of these questions are related with each other. The Ms. Sakai has already expressed her view, so please.
Thank you. I'd like to talk to you about the skill matrix. Finance, accounting, legal compliance, et cetera. We have three people have a circle on this chart for finance and accounting, and in this new matrix, we have so many different circles here.
What is the evidence for the skill assessment criteria? How do you assess these new people?
With respect to changes in criteria, Minai-san, who is the Chairperson of the Nomination Committee, will provide you with an answer, followed by Ms. Sakai.
This is Minai speaking. I would like to provide you with an answer to that question. With respect to finance and accounting, there is no change in the criteria. Criteria remain the same. People who have a very good experience with the financial background have been selected as candidates. That is all from me.
Sakai-san, would you like to say anything? If not, that is okay.
If I may add one thing here.
With respect to accounting and finance, there is no existing member of the Board who is an expert in these areas, and the nomination committee has been able to identify such people. There are circles for the skill metrics.
Are these people not experts even though they have a circle? Such ambiguous criteria, I believe, is the reason for Nidec's confused struggle at this moment.
Thank you very much for your comment. Thank you very much. This is Ms. Sakai speaking. I believe your comment is right. With respect to the creation of this skill matrix, we checked definition of each of these works, jobs, to see if these candidates are the right persons for these jobs. Proper accounting standards are what we need to be, you know, pursued by these candidates.
These candidates need to have experiences in these areas, and we need to have a very good expertise as well in these areas. We are trying to see if these persons are truly correct or not.
These two people will be the final people to, for us to answer the questions for. Thank you. The person on the far right.
This is the [chair] of xTECH . At the end of March, there has been a litigation raised by one of the shareholders. It has been 60 days, pretty much. Please provide us with any information about the impact of the newly emerged matters.
With respect to the litigation, we are aware of the litigation, and we have established an Executive Responsibility Investigation Committee.
Based on the proceedings, procedure of the investigation status of the investigation, we would like to discuss what best approach is, measures to launch. What is your second question?
Could that litigation request impact the quality issues or.
With respect to the current issues, we like to make a decision based on status of the investigation by the Investigation Committee.
The person on the far back, please.
This is Nomoto of Nikkan Newspaper. Here's my first question. With respect to the accounting matters, these are not going to impact your actual business operations, but I believe some business partners of yours are complaining about your companies in the group. If you think about the impact of those current issues on your current businesses, and I believe some people are saying that you should have noticed these business partners earlier. What type of risks are you taking into account now?
Thank you very much for your question.
Quality is the issues that is the very basis, and these issues are the very that affect the very basis of our company. As soon as we found out these issues matters, we communicate with our individual customers one by one in detail, and we like to change the way we work with our customers. That's what we conveyed to our customers as a part of our messages. That's what we would like to do as part of our reform. As of today, exact financial impact, et cetera, are yet to be able to be told to the press or any part of the public. We would like to make sure to continue to work on as the part of the business management. This is spring, and I believe this is a season of price negotiations.
Is there any impact of the current issues on price negotiations of your company?
At this moment, there is no such problem that I'm aware of. We will receive some comments in one way or another from our customers. At this moment and going forward, I would like to continue to address those issues with our customers.
Thank you very much. I'd like to move on to the second question, which is related to the business portfolio. As we have already discussed. There's the area for the structure reform. Before the identification of the misconduct, there were some businesses who had seen the difficulties, you said that, you know, you'd like to prioritize the profitable businesses. What's your energy about the business domains that will grow drastically?
Thank you very much for your question.
This is related to the direction of how each business should be reinvented or redeveloped. We have vigorous discussions internally. For example, the existing businesses that can grow drastically is related to the joint venture in China and France. Furthermore, in addition to what you see here, we'd like to increase Japanese customers, and we'd like to incorporate Japanese customers' perspectives into our businesses. However, there's no businesses that have been defined, and therefore we will be in the world where we can create new values together with our customers.
Are there any plan to withdraw from E-Axle?
Of course, we have to consider the restructuring, and then we'd like to retain all of the possibilities to identify the future direction. Including the withdraw from a certain business, we needed to have wider views.
Of course, it does not mean that an E-Axle is classified in such a business.
Thank you very much.
With this, we'd like to conclude the press conference. Thank you very much for your time.
Thank you very much.